by Jeffrey J. Schott, Peterson Institute for International Economics
and Scott C. Bradford, Peterson Institute for International Economics
and Thomas Moll, Peterson Institute for International Economics

June 2006

Difficult and sensitive issues will command the attention of US and Korean officials as they negotiate a bilateral free trade agreement (FTA). The United States will have to put long-standing US barriers to Korean exports of textiles, apparel, and steel on the table and resolve problems with South Korean access to the US visa waiver program. In turn, South Korea will have to open new opportunities for US goods and services, including autos, beef, and rice. Such a deal will pose a stiff political challenge for Korean officials. However, they will be under pressure in any event to reform their farm programs--either in the context of a final deal in the WTO talks or in response to Chinese initiatives in the region, which Korea will need to match. Both Korea and the United States also have important foreign policy interests in the FTA, particularly enhanced security on the Korean peninsula. South Korea would like the FTA to promote the policy of constructive engagement with North Korea, which the former has been pursuing by extending trade preferences to goods produced in the Kaesong industrial complex in North Korea. However, such a request would put the entire negotiation in jeopardy since the US Congress would reject preferences for the North Korean regime.